E-Locus - Institutional Repository of the University of Crete

Home Collections School/Department School of Social Sciences Department of Economics Post-graduate theses

Post-graduate theses

Current Record: 20 of 145

[Add to Basket]

Identifier

000417040

Title

Financial integration between the EMU and the world : the CHEER approach

Alternative Title

Χρηματοπιστωτική ολοκλήρωση μεταξύ της ΟΝΕ και του κόσμου: μια ανάλυση με την προσέγγιση CHEER

Author

Πινακουλάκη, Δήμητρα-Αιμιλία

Thesis advisor

Κουκουριτάκης, Μίνως

Reviewer

Γιαννόπουλος, Ανδρέας
Γιαννέλης, Νικόλαος

Abstract

The purchasing power parity (PPP) and the uncovered interest parity (UIP) hypotheses are among the most important but also controversial issues in international macroeconomics. On the one hand, the PPP hypothesis postulates that exchange rates adjust to price differentials; it simply advocates that the equilibrium exchange rate of two currencies should equalize their purchasing capacity. On the other hand, the UIP hypothesis states that the expected change in the exchange rate of two currencies equals the interest rate differential of the respective countries; considers international asset markets and asserts that the exchange rate adjust to interest rate differential. An alternative approach that is different from traditional theories of equilibrium exchange rate is known as Capital-enhanced Equilibrium Exchange Rate (CHEER), which was implemented, among others, by Juselius (1991, 1995), Johansen and Juselius (1992), Özmen and Gökcan (2004) and Giannellis and Koukouritakis (2013) Koukouritakis (2013). CHEER is actually a combination of PPP and UIP hypotheses and enables the interactions among exchange rates, prices and interest rates. The CHEER approach captures the basic Casselian view of the PPP condition, which implies that an exchange rate may be away from its PPP-determined rate because of non-zero interest rate differentials. But, unlike the PPP condition, it also indicates that the interest rates can have a medium-run, or business cycle, effect. In other words, the long-term persistence in the real exchange rate is mirrored in the interest rate differential. (MacDonald, 2000). The aim of this thesis is to investigate the validity of the CHEER approach using four exchange rates: euro against US dollar, euro against sterling pound, euro against Japanese yen and euro against Swiss franc by using monthly data from January 1999 to present. The validity of the CHEER approach for the exchange rates under consideration can be interpreted as evidence in favor of financial integration.

Language

Greek

Subject

CHEER

Exchange rates

Financial integration

Συναλλαγματικές ισοτιμίες

Χρηματοπιστωτική ολοκλήρωση

Issue date

2016

Collection

School/Department--School of Social Sciences--Department of Economics--Post-graduate theses